Market Order
An instruction to buy or sell immediately at the best price currently available.
Also called: market buy · market sell
Written by Javier Sánchez Ros
In plain language
A market order prioritizes certainty of execution over certainty of price. It will fill, and it will fill now — but at whatever the book offers.
Buying with a market order pays the ask. Selling with one hits the bid. In a liquid instrument that difference is a cent; in a thin one it can be several percent.
Large market orders walk the book. The first shares fill at the best price, the rest fill at progressively worse prices as each level is consumed.
Worked through
A market order for 5,000 shares into a book holding 800 at the ask
- Displayed ask
- $31.20 × 800
- Next levels
- $31.26, $31.35, $31.48
- Average fill
- $31.37
- Cost above the screen price
- $850
A market order says fill me now at whatever is available. It walks the book: the first 800 shares come at $31.20, then the price it pays climbs through each thinner level above until the order is complete.
The quote on the screen was never a promise. It was the price of the first 800 shares, and the trader who read $31.20 and multiplied by 5,000 is $850 out before the position has done anything.
On a liquid large-cap with thousands of shares at every level, this effect is invisible and market orders are entirely reasonable. On a thin name, at the open, or in a fast market, it is the dominant cost of the trade.
The exception is worth stating plainly, because it runs the other way. When you need out of a position that is going wrong, certainty of exit is worth more than price, and that is exactly what a market order buys.
Why it matters
Market orders are the right tool when getting out matters more than getting a good price. They are the wrong tool for building a position in anything illiquid.
Common mistakes
- Using market orders in pre-market or after-hours sessions where spreads balloon.
- Placing a market order sized larger than the visible depth of the book.
- Using them around news releases when the book momentarily empties.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
An order to buy or sell at a specified price or better — it may not fill at all.
The gap between the bid and the ask — the built-in cost of entering a trade.
The difference between the price you expected and the price you actually got.
How easily an asset can be bought or sold without moving its price.
The live list of all resting buy and sell orders at each price level.